Gina Rinehart family trust feud explained

Gina Rinehart has offered to step down as the trustee of the family trust one the eve of a court case against her children.

News Online Brisbane

The long-running feud over the Rinehart family fortune is set to go to trial this week in the New South Wales Supreme Court.

The civil trial is likely to examine allegations of misconduct against Gina Rinehart as head of the family trust.

Last week, Mrs Rinehart indicated she wanted to be removed as the trustee of the Hope Margaret Hancock Trust - worth $4 billion - but wants mediation to decide who should replace her.

However, two of her children - John Hancock and Bianca Rinehart - are pushing ahead with court action.

Hope Rinehart Welker, who initially supported John and Bianca, withdrew from action earlier this year.

Ginia Rinehart is the only one of the children supporting her mother, though she is unlikely to get her siblings backing to control the trust.

We look back over the ongoing feud:

What is the trust and to whom does it belong?

The fund holds a large share of the family's fortune, estimated to be $4 billion.

The trust was established in 1988 by Lang Hancock, with Mrs Rinehart the appointed trustee and her children the beneficiaries.

They were supposed to get their share of the money in September 2011, when the youngest child, Ginia, turned 25.

However, Mrs Rinehart had other ideas.

Four days before Ginia's birthday, Mrs Rinehart wrote to her children explaining the trust was set to vest, but warning them that they would be bankrupted if they took their money due to capital gains taxes.

Her children asked for evidence, which she refused to provide, and they subsequently began court proceedings.

John, Hope and Bianca also accused their mother of changing the trust in 2006 to prevent them from being able to take their shares until 2068 - something Mrs Rinehart denied.

Timeline of events:

2011

It is announced Mrs Rinehart is set to be sued by her daughter Hope, though the details are a mystery.

October 14:

Bianca Rinehartand John Hancock join the case against Mrs Rinehart, who is given a week toappeal against a judge's decision to allow the case to go ahead.

By this point it has been confirmed that the children were trying to oust their mother as the fund trustee.

Mrs Rinehart says she wants to resolve the dispute through confidential mediation and argues the matter could only be dealt with by the courts as a last resort, according to a provision in a family deed.

December 21:

A court rules the details of the legal battle will remain secret for at least another month.

2012

February 3:

Mrs Rinehart loses an application for a new suppression order on the family trust court case.

March 6:

Mrs Rinehart loses an attempt to have details of the case kept secret on the basis of fears for her safety.

March 9:

It emerges that Mrs Rinehart told three of her children they could be bankrupted unless they agreed to let her retain control of the family trust.

Details of the case are made public for the first time after Mrs Rinehart lost her High Court battle to have the case kept secret.

March 12:

John, Bianca and Hope allege Mrs Rinehart had deceived them by deliberately changing the vesting date of the trust without their permission.

July 30:

A court orders Mrs Rinehart to pay the legal bills of three of her children and the media after her attempts to keep the case secret failed.

It is thought the total cost was more than $200,000.

2013:

March 12:

Hope withdraws from a case to have her mother removed as head of a family trust.

August 5:

A court is told Mrs Rinehart wrote to two of her children offering to end the feud.

October 1:

Mrs Rinehart walks away from the feud saying she wants a mediation to elect a new trustee.

A court hears Mrs Rinehart offered to resign ahead of a court hearing. In spite of her offer, it is understood her son intended to push to have his mother's conduct investigated and a trial is set for October 8.

October 8:

The court is told that mining magnate Andrew Forrest was supporting John Hancock to take over the trust. Mr Forrest has sworn an affidavit backing him in the role.

October 9:

John Hancock withdraws his application to replace his mother as head of the family trust and instead backs his sister Bianca as the replacement trustee. The affidavit from Mr Forrest is withdrawn.

2014:

June 23:

Rinehart family feud over the $5 billion trust lands in an open court in Sydney, almost three years after the case was first lodged in September 2011.

June 24:

Bianca Rinehart is the first family member to give evidence in court. Sydney's Supreme Court hears Bianca has the best interests of the trust's beneficiaries at heart, and has the support of her brother for the role.

June 27:

Bianca Rinehart's barrister labels independent trustees incompetent.

Ginia Rinehart's barrister says an independent trustee was the only fair way to manage the trust.

Gina Rinehart issues statement after court hearing, reiterating her efforts to work in the best interests of Hancock Prospecting "which is of benefit to all my children given their interest via the trust I requested be set up for them".

What is the likely outcome?

Mrs Rinehart's lawyer Bruce McClintock said the offer to stand down as head of the trust should mean the matter is over.

"Mrs Rinehart has the power to appoint a new trustee or trustees - under the Western Australian Trustees Act, the documents governing the trust and the agreement of the beneficiaries under the Hope Downs Deed - and is willing to do so," he said.

Mrs Rinehart has demanded that a replacement be a family member with ''specific characteristics'' such as impartiality, rationality and experience in the resources industry.

While the offer to step down comes on the eve of the court case, it seems John and Bianca will push ahead with their calls for an investigation into their mother's conduct.

On what will come of the situation, John's legal advisor Alan Camp said:

"If the mediation doesn't resolve the issue of the most suitable appointment of a replacement trustee, then yes, the issue will be ventilated at the trial and then the trial judge will have it with in his discretion as an equity judge to appoint an independent replacement as trustee.

"And at that trial, in the course of coming to that conclusion, of course, all relevant issues will have to be ventilated."

Expert opinion:

"The replacement of a trustee is not an uncommon thing to occur, but it's more commonly done by agreement between the relevant parties," said trust fund law expert Roger Downs.

"The implications can be very serious, both financial and reputational. Clearly the role of a trustee is a very, very important one at law.

"The trustee owes very high degrees of fiduciary duty, high degrees of obligation for loyalty and honesty in the way in which they conduct themselves in undertaking the role as trustee.

"So a breach of that duty, if it's proven, would firstly bring them into considerable personal disrepute and additionally could involve them in bearing very, very large financial damages if their breach of the trust has caused a loss to the trust and the beneficiaries.

"They could be penalised in terms of their share of the trust and they could also be penalised by way of an awarded damages which would also be claimable against their other assets outside the trust.

"If [Mrs Rinehart is] found to have breached her duties and if that has caused a loss to the trust, then yes, the exposure to her personally could be very significant indeed; recognising, of course, that her strong argument is that, in fact, the vast value of the trust is very much dependent on the things that she has done in the course of her trusteeship of that trust."